Asness: Some Hedge Funds Are Worth ‘2 And 20’

Oct 29 2010 | 1:48am ET

Hedge fund fees have been coming down in response to investor pressure, but clients should be willing to pay for top managers, according to one such manager.

“When it comes to fees, true skills should still be worth a lot,” Clifford Asness, founder of AQR Capital Management, said. “If there’s any problem with the hedge fund industry, it’s not that there aren’t strategies worth 2 and 20, it’s that the whole industry is being priced as if it’s skill.”

Asness told the Buttonwood Gathering that diversified hedge funds generating high returns deserve to make 2% for management and 20% for performance. According to Hedge Fund Research, the average hedge fund now charges more like 1.5% and 19%.

“The problem with hedge funds being net long is not that net long is a bad idea, it’s that they are charging 2 and 20” for investing in stocks, he said.


In Depth

Royalties: The Alternative Assets of the Music Industry

Jul 8 2016 | 7:01pm ET

Recent market volatility has investors seeking greater insight into alternative...

Lifestyle

Vortic: Making Great American Watches Again

Jul 25 2016 | 6:29pm ET

If you are compelled by stories of entrepreneurial vision & drive, or simply...

Guest Contributor

MPI: Like Stellar Returns? Better Understand the Risks First

Jul 22 2016 | 8:44pm ET

When the press reports extraordinarily strong relative or risk-adjusted returns...